What is a Blacklist?
A blacklist is a list of persons or organizations that are penalized because they are believed to engage in unfavorable or unethical activity. A blacklist can be a database maintained by any entity, ranging from a small business enterprise to an inter-governmental body. Depending on the scope of the blacklist, it can be made public or kept confidential and only accessible by select organizations. Inclusion on a blacklist can affect an individual or company's ability to travel, purchase goods and otherwise conduct their affairs.
The negative effects of being blacklisted can be quite considerable, with huge inconvenience being the least of them; the more severe effects include loss of credibility and goodwill, a decline in business and clients, and financial hardship. Some notable blacklists in history include the blacklist of union supporters in the early 1900s which prevented them from finding employment and the Hollywood blacklist which targeted people in the entertainment industry believed to be communists.
An example of a public blacklist is the list of countries maintained by the Financial Action Task Force (FATF), which lists countries that the FATF considers to be uncooperative in the global effort against money laundering and terrorist financing. In addition to being shamed in front of the international community, being placed on the FATF blacklist has real consequences for the countries. Transaction involving those countries will be subject to more levels of scrutiny by banks. This friction on transactions can discourage companies from doing business in those regions of the world. Moreover, the FATF blacklist is used by some international organizations and nations to set policies around trade and economic involvement with blacklisted nations.
The Threat of Blacklisting During International Disputes
Although most countries do have blacklists of organizations and suppliers who are not to be trusted, the threat of blacklisting is used far more often than the actual action. This is particularly true during international trade squabbles. For example, in 2019, the U.S. government placed an export ban on China-based Huawei, leading other nations to also ban Huawei from certain procurement contracts. In response, China threatened to blacklist all the companies of foreign countries that enacted a Huawei ban. Despite the threats, these types of disputes are often resolved without having entire nations put on blacklists.
The Myth of a Credit Blacklist
A common misconception concerns the purported existence of a "credit blacklist" to deny loans to consumers with poor or spotty credit histories. The reality is that creditors and lending agencies rely on the consumer's credit history rather than a blacklist to guide their loan decisions. There are parts of a credit history that will result in a majority of lenders refusing loans, such as multiple defaults and bankruptcies, but there is not a list that exists separately from your credit report.